Tiffany's Quarterly Sales Dip Due To Strong Dollar

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Mar 23, 2015
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A leading luxury jewellery company in the United States, Tiffany & Co. (TIF, Financial) lost some of its sparkle as quarterly sales in the fourth quarter ended January 31, dipped for the first time in half a decade. Additionally, sales are expected to fall further in the current quarter in reaction to a stronger dollar.

Though the company projected a sizeable growth in global sales and earnings in the full year of 2014, in the results of the this past quarter, worldwide net sales fell by around 1% to ring in at $1.3 billion. Net earnings, however, increased to $196 million, up 3% from the year-ago quarter.

“2014 was a successful year for our Company with meaningful progress made by our global team. We expanded our store base, introduced compelling new jewellery designs and strengthened customer awareness. And we achieved very healthy growth in net sales and earnings for the year," chairman and chief executive officer, Michael J. Kowalski, said in a statement released by the company.

Moving forward, going down

The New York-based company has predicted a further drop in sales by 10% in the first quarter of 2015 as they foresee declined sales in America. Sales in the region were looked upon to propel growth, but a slump during the holiday season worked against this prediction. Sales in America are expected to fall further over the next two quarters of 2015. The rise of the dollar, by almost 9% valued against other major currencies, has lowered the value of Tiffany’s sales abroad, and also dissuaded foreign tourists from purchasing jewellery at Tiffany stores in the US.

“By now it should be clear that Tiffany is facing challenges from global economic uncertainties, especially from the effect of a strong U.S. dollar on the translation of foreign-denominated sales into dollars and on foreign tourist spending in the U.S.,” added President Frederic Cumenal. “As a result, we have adopted a cautious approach in our planning for the coming year, anticipating modest growth in net sales and minimal net earnings growth for the full year; this assumes pressure on sales and earnings in the first half of the year followed by healthy growth in the second half. Longer-term, we see an exciting future for Tiffany as we pursue important expansion opportunities. Our plans for 2015 call for adding a net of 12-15 Company-operated stores across most regions, introducing compelling new jewellery and watch designs, including Tiffany's new CT-60 watch collection being introduced next month, and continuing to invest in new systems and in our people to enable us to most effectively deliver an exceptional in-store experience to our growing base of customers.”

Stock shock

Tiffany’s stock had already dropped by about 19% in 2015 before the earnings report was released. On Friday, early morning trading in New York saw its shares fall by 3.9% to close at $83.29. Analysts are doubtful of Tiffany’s tall predictions for the future. An analyst from Edward Jones is sceptical of Tiffany’s confidence that sales will improve in the third and fourth quarter of 2015, reported Reuters. An analysts’ poll conducted by the news agency, finds that there is a consensus on the expected rise of the dollar throughout the year.

As President Cumenal takes over as the new CEO on April 1, current chief Michael Kowalski will become a non-executive chairman. It remains to be seen if Tiffany & Co. keeps to its positive predictions for the future and creates earnings enough to reckon with world’s number one jeweller Compagnie Financiere Richemont (XSWX:CFR).